The 3 Accounts Young People Should Know About
When you go to an average bank’s website, you’ll have the option to open 30+ accounts.
As a young person, who may have never been taught personal finance, which ones are you supposed to open?
You have your basics of a checking and savings, but beyond that it can be hard to know the most impactful accounts to open.
Let walk through the 3 that I think every young person should at least know about.
Roth Individual Retirement Account (IRA)
Chances are someone has told you to open a Roth IRA. And I don’t blame them. When you contribute to the account and invest said dollars, the contributions grow tax-free. Not only that, but when the time comes to withdraw, the withdrawals are also tax free. This account is a great tool for taking advantage of the lower tax bracket that you are in when you are younger and earning less money (article explaining this coming soon!).
High-Yield Savings Account
A HYS is an excellent option for short-term savings and emergency funds (which you need). It offers much higher interest rates than traditional savings accounts (traditional savings are usually around like 0.01% which is terrible), helping your money grow steadily while remaining FDIC insured (we’ll have an article explaining this later on). You can access your funds anytime, making it perfect for building a financial safety net or saving for upcoming expenses. For the cash you have on hand that is not in a checking account, a HYS is a great option.
Taxable Brokerage Account
Taxable Brokerage accounts offer unmatched flexibility and liquidity, making it perfect for when you’re aiming to invest for medium- or long-term goals (most goals before retirement). Unlike retirement accounts, there are no contribution limits or early withdrawal penalties, providing easy access to funds. You can invest in stocks, bonds, ETFs, and more, allowing for wealth-building through diverse investments.
Feel free to reach out with any questions you may have on this topic!
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